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Subscribe to RSSFrom msnbc.com's Tom Curry: When a debtor’s borrowing costs start to exceed what he spends on necessities such as food and medical care, it might give him pause.
Likewise, to understand the federal government’s growing debt problem, consider these two items from President Obama’s Office of Management and Budget (OMB), presented Monday in the president’s fiscal year 2012 budget proposal:
Last year, taxpayers spent more than twice as much on the Medicare program as they did on interest payments on federal debt.
But starting in 2018, the federal government will pay more in interest costs than it will spend on Medicare, the health insurance program for the disabled and people age 65 and older. (The OMB excludes from its calculation the premiums that Medicare beneficiaries pay; it includes only what taxpayers pay for the program, which covers 80 percent if its costs.)
Analysts have long cited Medicare as the prime example of the relentless federal spending growth. For 30 years, Medicare has been growing faster than America’s national income.
So if the cost of paying interest on the money the government borrows will soon exceed Medicare spending, that will be a cold bucket of water in the taxpayer’s face. More and more tax revenue will be going to pay for the privilege of being allowed to borrow more and more money.
According to the OMB, interest costs will go from almost 6 percent of total federal outlays in 2010 to nearly 15 percent in 2020.
“Huge deficits plus the assumption that interest rates will rise modestly are causing forecast interest costs to explode,” said former Congressional Budget Office director Rudolph Penner. “Consequently, we are sending money to foreign investors and domestic capitalists that could be much better used for other things.”
A debtor borrows because his current income falls short of his wants. Likewise for the federal government, there’s simply not enough income, or revenue. For the entire ten-year forecasting period in Obama’s budget proposal, revenues lag far behind spending.
The debt problem will also be driven by what Penner referred to: higher interest rates in the years ahead. Morgan Stanley economist Richard Berner told the Senate Budget Committee at a recent hearing, “We enjoy low interest rates. And we enjoy favorable borrowing terms right now. But, of course, that's going to run out.”
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I don't know....maybe it's just me, but, wouldn't that $700 Billion Tax Cut e just gave to the robber barons have gone a long way towards the paying down the interest?
Instead the righties are digging around their Bar-Co-Lounger cushions looking for more 'change' to steal from the disadvantaged!
Who would of thought!
Let's see. Late December 2010, Democrats were is charge of the House and Senate and had a Democrat President. Anyone of them could of stopped it along the way. Time get a new story.
Oh NOOOO John!
We will keep repeating it loudly & frequently!
You see, it was the Teapublicans that held this country hostage by refusing to extend unemployment benefits a week before Christmas & force tax increases onto the MIDDLE class (well, what's left of it anyway).
Surely, you haven't forgotten already... or maybe you were at a gun show when that went down! ;o)
Come old gal and say it with me: Obama's tax cuts for the rich. Has a nice ring to it, no?
And I know you are old, but "robber barrons?" Really?
Yeah John, ya'see, the Republicans tricked the Democrats into voting for it.
Nasty old Republicans, taking advantage of the mentally unstable like they did.
Ahh, someone in the media is starting to see the problem. Maybe next they'll ask Obama how he intends to deficit spend the country to prosperity.
No, that's pretty much the high point with F.
New here are you?
Like I told you before JoAnna - you're about as clever as a cockroach, but not nearly as cute & cuddly!
You seem tired these days old girl!
I keep hoping for a little more civility. Maybe they shouldn't have passed the tax cuts but we are going to have to reduce spending also. I would much rather spend taxpayer's money on American citizens than to waste it paying off interest. Cutting the deficit would benefit the country in the long run and maybe we should try to do this as country.
Here is an "unfortunate truth" about the interest on the National Debt;
Obama's new budget shows a National Debt increasing to over $25 Trillion in 9 years, and if interest rates return to the normal of the last 25 years (4.7%), the annual interest will be about $1.2 Trillion per year.
Under Bill Clinton, the average interest was about $220 Billion per year. Under G W Bush, the average interest was slightly under $200 Billion per year (yes it was lower).
Under Obama's spending plans, the interest alone on the National Debt could increase by more than $1 Trillion PER YEAR ($10 Trillion+ over 10 years), which will have to be paid by families that actually pay income taxes. Since about 47% of American families pay NO federal income taxes (many actually get 'credits' back without paying anything), that means that the roughly 40 million TAX PAYING American average family of 4 will get stuck with increased tax payments of about $25,000 per year - Just to pay increased interest on the National Debt.
Are you still happy with that "Change we can believe in" that you voted for?
Well in all honesty the tax cuts for the rich were due to the Republicans holding the unemployed as hostage to get what they wanted.
Anyone with half a brain knows what heartless bastards the Republicans can be. But, of course the President being a decent human being could not let the unemployed suffer. So, he went alone with these hostage takers in order to save the people in need.
This chicken crap is, and will always be the Bush Tax Cuts.
Job1 "This chicken crap is, and will always be the Bush Tax Cuts."
Perhaps the Democrats should have just let the "Bush Tax Cuts" expire for everyone. The 'Rich' would be paying about $70 Billion more per year, but the Middle Class would be paying about $310 Billion more per year. That would have greatly reduced the Deficits, but it would also likely have led us into another recession.
Life is full of tough choices.
Just be patient, that's what I heard the President say yesterday.
Oh and there were ZERO tax cuts
Oh again, a LOT less spending in all categories will go a long way to reducing our debt and therefore reducing our future interest payments.
Bi-partisan effort = 'mentally unstable'.
I like it. I bet the American people do, too.
why does everyone say it was the republicans fault or the dems fault every year more an more people and more an more money is needed to pay for all that the government spends, its the government in it's entirety, we need to force them to cut the buget now. by half so there is no deficit to worry about, stop all new hires an no replacements for those retiring in government and no raises either , thats what has to be done. a complete stop. no more spending, cut thosands of the admin. employees that just walk around all day bull@!$%#ing in the gov. offices.
Thanks GW, you are the president that just keeps on costing the middle cla$$
We are responsible for this nonsense in spending.We elect those that we think best represents our best interests.The truth is 535 people make us better off,or much worse off,depending on what they are lobbyed to do.That's right,they are elected by you and bought by someone with more $$$$$ than you.It's not a left/right thing,it's a $$$$$ thing.So,unless the lobbyists are ran off,they will run off with all the goods and favors.It's called "you get what you pay for".The next time you want to blame Bush,just look in the mirror.Congress as a whole can stand up to any president and say NOOOOO!But will they?
Kind of hard to make "investments in rail and electric cars" when you are borrowing money. Perhpas we should not emulate the Wall street practice of investeing bowrrowed money. I believe they call that "leverage."
Well, it is a less alarming way to present the emergent matter.